Square Mile Academy of Funds: Ratings Roundup for July 2022

Square Mile Investment Consulting and Research (Square Mile) analysts conducted 62 interviews with investment professionals from 35 asset management groups during the month of July 2022.

Based on the information gathered at these meetings and after review in light of company announcements and developments, the following actions have been taken.

New grades

Man GLG Sterling Corporate Bond Fund Achieves Positive Prospect Rating

Square Mile’s analyst team gave the Man GLG Sterling Corporate Bond fund a positive outlook rating. They view its lead manager Jonathan Golan as a talented bond manager with a positive four-year track record at his former company. Mr Golan joined Man GLG in July 2021, where with his new team he continued to deliver strong returns in sterling corporate bond strategies.

Unlike many other funds in its industry, this fund’s advantage lies in its bottom-up focus on smaller issuers and the team’s ability to extract alpha from undervalued credits that are overlooked by larger investors. (Decision of 20.07.22)

ASI Fixed Income Passive Range Achieves Recommended Rating

Square Mile introduced five passive fixed income funds from abrn to the Square Mile Academy of Funds. Recommended ratings have been assigned to the funds ASI Global Corporate Bond Tracker, ASI Short Dated Global Corporate Bond Tracker, ASI Sterling Corporate Bond Tracker, ASI Global Inflation-Linked Bond Tracker and ASI Short Dated Global Inflation-Linked Bond Tracker.

The ASI Sterling Corporate Bond Tracker aims to track the Markit iBoxx GBP Non-Gilts Overall Total Return Index while the other four track the performance of a dedicated suite of Bloomberg Fixed Income indices.

These notes acknowledge Square Mile’s high regard for the abrn passive team. The funds are priced competitively and analysts believe they will track their respective benchmarks within an acceptable range. (Decision of 19.07.21)

HSBC FTSE All World fund obtains recommended rating

Square Mile analysts have given the HSBC FTSE All World fund a Recommended rating, complementing the eight passive funds from HSBC Asset Management that currently hold Square Mile ratings. This fund seeks to track the performance of the FTSE All World Index, which includes over 4,000 companies from nearly 50 different countries, in both developed and emerging economies. It will generally have a weighting of around 60% for companies domiciled in the United States. This rating reflects Square Mile’s high regard for HSBC’s passive team. Additionally, the fund is priced competitively and should track its benchmark within a reasonable range. (Decision of 08.07.22)

Ratings retained

The Royal London UK All Share Tracker fund maintains its recommended rating

Royal London has received shareholder approval to merge the Royal London UK All Share Tracker Fund with the Royal London UK Broad Equity Tilt fund. The Royal London UK Broad Equity Tilt fund, launched in December 2021, implements small off-benchmark tilts incorporating responsible investing and ESG insights into its process while maintaining the same risk and return characteristics than the FTSE All Share. Given these tilts, Square Mile analysts expect the UK Broad Equity Tilt fund to have slightly higher tracking error than the UK All Share Tracker Fund, although still within a reasonable range.

Square Mile sees this merger as a smart move, as the size of the original fund has shrunk over the past nine months. Given that the new fund has now reached an appropriate level of assets and availability for clients, Square Mile confirms that the recommended rating will be transferred to the new fund after the merger. (Decision of 28.07.22)

The GAM Star Japan Leaders fund retains its A rating

Square Mile analysts reviewed the GAM Star Japan Leaders fund upon learning that its co-portfolio manager, Reiko Mito, was set to leave the company at the end of August. While this was an unexpected development and Ms Mito’s departure represents a loss of expertise and resources, the fund’s lead manager and strategy architect, Ernst Glanzmann, remains in place and continues to be ably supported by the investment manager, Lukas Knueppel.

GAM Investments plans to replace Ms Mito in the near future and analysts remain happy with the structure of the interim team. They therefore decided to keep the fund’s A rating. (Decision of 19.07.22)

Columbia Threadneedle Investment: ratings retained following fund name changes

In July 2022, Columbia Threadneedle Investments rebranded several funds in line with the company’s global brand. However, this did not impact the investment approach of any of the funds and therefore the following ratings remain unchanged:

Name of old fund New fund name Square mile valuation
Threadneedle European Select TC European Selection

A

Threadneedle High Yield Bond CT High Yield Bond

A

Shares and bonds managed by Threadneedle CT Managed Stocks & Bonds

A

Equity-focused Managed Threadneedle Focused on actions managed by CT

A

Actions managed by Threadneedle CT Managed Actions

A

Threadneedle UK Equity Income CT UK Equity Income

AA

Threadneedle social link in the UK CT UK Social Bond

Responsible Positive Prospect

(Decision of 18.07.22)

Artemis UK Special Situations fund retains A rating

At the end of June 2022, Artemis confirmed that Derek Stuart, co-manager of the Artemis UK Special Situations fund who has managed this fund since its inception, will step down from day-to-day management of the fund at the end of 2023. Co-manager, Andy Gray, involved in the fund since 2014, remains on site. Additionally, and as part of transition planning, Henry Flockhart, formerly fund manager at Aviva Investors and Aberdeen Standard Investments, joined the team in July 2022.

Square Mile analysts note that Mr. Stuart’s departure represents a material loss of experience for the fund and that Mr. Flockhart is new to the approach and the company, analysts will meet with the team over the coming months to discuss the transition period and the future structure of the portfolio. However, they decided to keep the fund’s A rating in the meantime. (Decision on 01.07.22)

Note removed

PIMCO Select UK Income Bond fund loses A rating

Square Mile has withdrawn its A rating from the PIMCO Select UK Income Bond fund. The strategy has had a difficult period of performance in recent years, accompanied by a significant decline in assets. Although Square Mile analysts no longer have sufficient conviction in this fund to retain its rating, they continue to believe that investors can benefit from PIMCO’s impressive fixed income capabilities in a variety of other strategies. managed across their business. (Decision of 14.07.22)

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